Crypto lender Celsius supported its token while insiders benefited, according to a US bankruptcy examiner

  • March 8, 2023

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A U.S. court-ordered examiner report made public on Tuesday revealed that the bankrupt cryptocurrency lender Celsius Network inflated its balance sheet as two of its founders paid out millions by using investor funds and client deposits to support its own coin.

During the COVID-19 pandemic, cryptocurrency lenders like Celsius saw a surge in business, luring depositors with high interest rates and convenient loan access. Following the suspension of customer withdrawals from its platform, New Jersey-based Celsius filed for bankruptcy in the United States in July of last year.

The investigation

Shoba Pillay, a former prosecutor, was designated as an independent examiner by U.S. Bankruptcy Judge Martin Glenn, who is presiding over the Chapter 11 case, in September. She was given the responsibility of looking into complaints from Celsius clients that the business ran like a Ponzi scheme and of reporting on how it handled bitcoin deposits.

Requests for comment from reporters were addressed to several addresses, including an email on Celsius’ website, a public relations company that represented Celsius at the time of its bankruptcy, and CEO Alex Mashinsky’s attorney. Celsius did not immediately react to any of these requests. After the report’s publication and during the night in American time, the demands were made.

Retail clients’ cryptocurrency deposits were collected by Celsius, who then used them to buy cryptocurrency in the equivalent of the wholesale market. It raised some of the first funds to fund its business by inventing and selling its own crypto currency, dubbed “CEL”.

According to the investigation, the corporation promised customers that it would purchase CEL on the secondary market and deliver it to them as rewards. The report claimed that this would increase CEL’s pricing while simultaneously bringing in new customers

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Celsius faces backlash after unveiling dull recovery plan to exit bankruptcy

  • March 6, 2023

Amid the ongoing bankruptcy hearing, the now-collapsed crypto lender Celsius Network has unveiled a plan to exit the process by rebranding it into a publicly traded recovery corporation.

Celsius lawyers shared that if the plan is approved, creditors with locked assets above an unspecified threshold will receive a token called the Asset Share Token (AST). Notably, the AST to be received will reflect the value of their assets, and holders would be entitled to earn dividends or sell them on the open market.

However, the plan has received backlash from the crypto community, with commentators terming it a potential scam. In particular, a Twitter user and commentator by the pseudonym Crypto_Tolkien suggested that the reorganization is a scam while questioning the issuance of a new token instead of the users’ originally deposited cryptocurrencies. 

“The fake reorganization is a scam to steal more of your funds locked on their platform and issue you a worthless “NEWCO” token instead of your Bitcoin, Eth, or Link. They are trying to block any other plan from being considered besides their own,” he said in a tweet on January 29. 

Controversy around payout threshold 

It is worth noting that the threshold for releasing the token has not been set, with Celsius lawyers stating that there are ongoing discussions around the matter with the Unsecured Creditors Committee (UCC). Consequently, Crypto_Tolkien alleged that the two entities are planning to steal more money.

“Celsius and the UCC are planning right now to steal your money that you withdrew 90 days prior to Celsius declaring bankruptcy through clawbacks. They don’tdon’t care if you used that money to pay taxes or for hospital bills. They will put a lien on your house and garnish your wages,” he said

Failure to get the right bids

Indeed, according to Celsius, the

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